Reserve Pension- Merged

[geo]

I also have a question.  I took the RFRG, in a lump sum direct to my banking account, no RRSP.  I understand it was taxed, but is there any provisions other than investing into RRSP where this can become tax exempt?
I was medically released, and I receive a monthly pension from VAC.
dileas
tess

well, if you put all the money you got from the RRFG back into RRSPs then, in theory, you should be able to get your taxes back BUT, do you have room in your RRSPs to fit it into....

Note, there is a provision for gratuity paid WRT prior years of service (pre 85) so that $$ from before that can be rolled into RRSPs without it affecting your RRSP limit.

WRT the Reserve plan buyback.... you need the room in your RRSP limits for you to buy that back.... else, you get an overcontribution and that's a no no too.

 

[the 48th regulator]

As I said, I did not roll any of it into an RRSP.

Hence why I was asking, WTR to method of my release, do I have cause to claim back any of the deductions at tax time?

dileas

tess

 

[Stoker]

WRT the Reserve plan buyback.... you need the room in your RRSP limits for you to buy that back.... else, you get an overcontribution and that's a no no too.

So what you are saying is that everyone who elects to buyback their pension need to have their rrsp contribution limit equal to their buyback amount or risk overcontribution. If thats the case what about people who need to buyback over a hundred thousand dollars and lets say only has twenty thousand contriution limit left due to regular purchase of rrsps? I thought because I was transferring one rrsp(civilian) to another plan(military pension) you could do that even though you had your rrsp contribution limit maxed out.

 

[dapaterson]

Stoker:  It is possible to transfer from RRSPs directly to a pension plan.  There is specific paperwork to be completed.  If it is done incorrectly you will be charged taxes as if you withdrew all your RRSPs.  I am in the same boat - I will be taking about 2/3 of my RRSPs to buy back my time.

There are going to be briefing across the country to provide information on the new pension plan.  Keep your ears open - they may not get much advance notice (For the one in Ottawa today, notification was sent out yesterday).  And since the topic is "CF Pension Modernization", it's scheduled in the early afternoon - when most class A reservists will be working.

At least they're consistent...

 

[Haggis]

There are going to be briefing across the country to provide information on the new pension plan.  Keep your ears open - they may not get much advance notice (For the one in Ottawa today, notification was sent out yesterday).  And since the topic is "CF Pension Modernization", it's scheduled in the early afternoon - when most class A reservists will be working.

I'm on leave today and am not in Ottawa.  If you are attending, I think we'd all appreciate it if you could post a "Reader's Digest" version of what was presented.

 

[Rifleman62]

First of all, everyone should review their own case with a certified Financial Advisor. I am not a FA. The following is my understanding
( my post this am got lost in the either, and DAP and Geo have provided some info): You can transfer your RRSP into a Registered Pension Plan ( the Reserve Pension). If you owe a significant buy back, you will probably have to transfer all of your RRSP into the RPP, so as not to be over contributed.  DO NOT cash in your RRSP, as you will pay tax. On the old CFPMP website there was a document stated you could cash in your RRSP. It should have stated – transfer. Most Canadians have not used all their RRSP contribution room. You can find out how much contribution room you have from last years CRA Notice of Assessment (the amt of your refund or how much you owe). If you do not have this, phone CRA and they will tell you. The law changed in 1994, and all contribution room you had up to that year, but had not used was wiped out.  The figure you will get is the contribution room you have not used for RRSP or RPP (e.g. a company pension if you have one), since 1994. You can use the RFRG to buy back. It MUST BE transferred to the RPP ( Reserve Pension). Depending how long you have been in the military, you may be able to transfer all of the RFRG into the RPP or a RRSP, regardless of now much contribution room you have e.g. The amt that can be transferred depends in part by reference to the number of years of employment before 1996. See CRA website  IT-337R4 (Consolidated), Income Tax Act, Retiring Allowance. - http://www.cra-arc.gc.ca/E/pub/tp/it337r4-consolid/it337r4-consolid-e.pdf

If you have already got your RFRG, and did not transfer it into a RRSP/RRP, I think you may be out of luck. You can contact CRA and plead for mercy. If you were released medically, and are receiving the two year rehab benefits from SISIP, you had to be completely released from the CF to get that benefit. You cannot even be Supp Res. Therefore, you are not eligible for the Reserve Pension. This is my understanding.

After you figure out the additional cost of 7% compound interest vice 4% simple interest, in my case an additional  +$100K, it will be interesting how I can contribute that extra amt when it was never considered taxable income. CRA does not have an answer to that, but I am sure the boys in CFPMP have got that cash grab figured out. Anyways, I have stirred the pot, and I will post the results. I personally will not do a Redress of Grievance, as it is a waste of time. Others should though. I will take a different avenue. The info I will use will be freely available to those who are interested.

 

[geo]

Rifleman....
for the past year and a half, people released 3(b) have been put into a special category of Supp reserve pending the arrival of the reserve pension.  You are non employable but are still a member of the club.  Expect that category of Supp list to dissapear in the next 18 months as the Reserve pension shakes itself out.

.... here is another interesting wrinkle.... if you borrowed money from the bank to buy an RRSP; the interest on that is not deductible.... so, what does that tell you about the interest in the Reserve buyback scheme.....  I do not think it is deductible either...

Financial advisor.... gotta talk to da man.

 

[Haggis]

Rifleman....
for the past year and a half, people released 3(b) have been put into a special category of Supp reserve pending the arrival of the reserve pension.  You are non employable but are still a member of the club.  Expect that category of Supp list to dissapear in the next 18 months as the Reserve pension shakes itself out.

That speical category is a "unit" created in PeopleSoft (UIC 8999) for this explicit purpose.  This applies to all members of both the Reg F and Res F who have been released under QR&O 15.01 items which, in the past, would have made them ineligible for transfer to the Supplementary Reserve (UIC 0812).  Your release item will not change and once you are processed throught the pension system you will be released.  If your release item made you ineligible for re-enrollment, you will remain ineligible.

 

[geo]

(that's what I said... I think :???)
But, as Regs are already entitled to pension, they aren't included in the UIC 8999 thing

 

[dapaterson]

I was present at the CFPMP breifing this afternoon in Ottawa (for anyone who was there, I was the, ahem, more involved member of the crowd )

The main points that are new or different from previous information follow.

1. All members eligible to enrol in Part I.1 (part-time) or part I (full-time) will receive a letter from DAPPP (the military pay folks); these should arrive between mid-March and mid-April.

2. Pension deductions for eligible members will begin on mid-March payrun for pay earned on or after 01 March 2007.  These will be current deductions only; elections for prior service will follow.

3.  For part I (full-time) at least, if documentation cannot be found, the old "1/4 time" rule will be applied for periods other than class B and C, where the member was neither NES nor ED&T (other than MATA/PATA ED&T).

4.  To be eligible for an annuity or allowance, a Reserve Force member must release from the CF.  Transfer to the Sup Res will not result in an entitlement for Reserve Force members.  Reg F members will still beable to release with an annuity and immediately join the Reserve Force.

5.  A Res Force member in receipt of an annuity may not resume serving.  Only former Regular Force mebmers may draw an annuity and continue to serve; Reservists will cease receiving any benefits under the CFSA upon resuming service, whether full or part time.

6.  Under Part I at least (not sure about part I.1) a member's estate will receive 5 years of benefits if the member leaves no survivors.

7.  Accumulated RFRG cannot be transferred directly to the pension plan to buy back service.

8.  All paid service will count for determining eligibility, regardless of whether a member elects to buy it back.  Not buying back service will lead to reduced benefits.

9.  Members will have up to 3 years to elect after the coming into force; for members becoming eligible in the future they will have 1 year from their eligibility date to elect.

10.  Interest on contributions will be paid based on the rates in force in the current year.  For example: the rate for Part I./1 is 4.3% in 2007; that is the rate you will pay on old earnings if you elect this year.  if you elect next year, the rate will be 4.6%; you will pay that rate on old earnings if you elect next year.  (this is the contribution on earnings, not the interest - that rate is 7%).

Those are the big points that jumped out at me; there may be others I'll recall as I review my notes.  I will also review the calculator I posted earlier, and make any adjustments necessary.  The "Official" DND calculator should be posted to the DAPPP website March 1st or so - it will assist you in determining your contributions.  The benefits calculator will follow later.

 

[Haggis]

(that's what I said... I think :???)
But, as Regs are already entitled to pension, they aren't included in the UIC 8999 thing

Yes they are.  Reg F members can release into the PRes or the Supp Res.  8999 applied to them particularly if they choose not to transfer to the Supp Res.  Each member's case will be reviewed to determine if the released Reg F member will still qualify for a pension, regardless of release item and time served.  The idea of UIC 8999 was to ensure that nobody fell through the cracks. Everybody who isn't release into the Supp Res (because of ineligiblility under existing business rules)  is released into 8999 until their pension eligibility is deteremined.

As you rightly said, Geo, once that mob is sorted out UIC 8999 will join the ranks of "inactive units".

 

[54/102 CEF]

An excellent contribution - and very good balance between you and Haggis

 

[Haggis]

I was present at the CFPMP breifing this afternoon in Ottawa (for anyone who was there, I was the, ahem, more involved member of the crowd )

DAPATERSON:  Good stuff, and thanks for the info.  I'll bet you still didn't equal the major who played "pokey chest" in front of 500 people with ADM (HR-Mil) about four years ago.  I wonder where he is now???

7.  Accumulated RFRG cannot be transferred directly to the pension plan to buy back service.

But once you cash out your RFRG can you later buy back years using that money?  The assumption is that when you recieve your RFRG you're "out".  Therefore I wouldn't think you could use RFRG money to buy back years after the fact.

 

 

[54/102 CEF]

The Maj above is still around. Now LCol last I saw.

As for the RFRG - it dies and is reborn as equivalent value as part of your pension contributions - or am I leaning over the Grand Canyon as usual. Anyone?

 

[Haggis]

An excellent contribution - and very good balance between you and Haggis

Thanks.  I, too am from NDHQ and I'm here to help!

The Maj above is still around. Now LCol last I saw.

Interesting....

Since I can't seem to buy a vacancy on the CQC I think I may have found a way to finally make CWO...

 

[dapaterson]

CEF and Haggis:

RFRG amounts are vested and protected to 28 Feb 2007.  After that date, further growth is tied to your full-time equivalent service - you need 365 days to add a year.  Class A days count as 1.4 days each towards full-time counts; class B&C days count as 1 day each.  So a reservist parading 50 days class A plus 20 days in the summer would be credited for 50x1.4+20 = 90 days; it would ake just over 4 years parading at that rate to gain 1 year towards the severance pay.  Few class A soldiers enrolling today (or enrolled in the past 7 or 8 years) will see anything from the RFRG, I suspect, as the threshold will be all but unattainable.

When you release, you will receive your RFRG.  If you are still serving and electing to repay, you don't have that money to draw on.

Before then, you will have to decide whether or not to elect to buy back your previous service.  That election is irrevocable.  You can choose to buy back all, part, or none of your service.  ONCE YOU MAKE THAT CHOICE YOU CAN NEVER GO BACK.  You can buy back with a lump sum, in installments over 20 years or until age 65, whichever is later, or make an initial lump sum payment and pay the rest over time.  You can choose to increase your payments later on, but you cannot change the amount you choose to pay back.  Choose wisely.  And choose (reasonably) quickly, since you must pay back at the current rate - which is slated to increase yearly over the next 3 or 4 years.

Clerks have begun to receive fast training on the mechanics of the process, but are being told in no uncertain terms that they are not trained to provide advice.  They will be able to help you fill out forms, and find information, but cannot advise you.

Everyone's case is different.  There are federal limits on amounts you can contribute to pensions/RRSPs every year; that may impact on your choices.  As more information comes out gather everything you can and find a good financial advisor.  Pension policy and regulation is complex; I've got a stack of papers 2.54 cms tall that I've read several times and each time I still find something new.


For those who rarely read the Maple Leaf, be sure to get a copy of next Wednesday's paper:  there will be an 8 page insert on the new pension arrangements

For most people, this is a good thing - the value of the pension you will receive will be greatly in excess of the amount you will be required to pay.  The poor passage of information, the failure to recognize the wide array of circumstances, and the dramatic increase in certain contribution rates all fall into the "not so great" column.


Oh, and Haggis:  Was that the briefing in the drill hall just after 9/11 where the topic was Reserve pay,and the Major stood up and told ADM(HR-Mil) he was wrong?  I was there for that one... 

 

[54/102 CEF]

A question - I joined up in Oct 1972 - where/how does my current RFRG $ figure into this?

 

[dapaterson]

CEF:  In your case, you've already maxed out the RFRG entitlement: 30 years x 7 days per year.  Upon your release you'll get 210 days of pay at your rank and IPC on release.

Your pension will be based on what you choose to buy back, and on service after 01 March 2007 where you will be obliged to contribute.  Two distinct issues.

 

[Haggis]

Oh, and Haggis:  Was that the briefing in the drill hall just after 9/11 where the topic was Reserve pay,and the Major stood up and told ADM(HR-Mil) he was wrong?  I was there for that one... 

Yep.. That's the one! 

If 54/102 CEF is correct then I'm certain it wasn't you. 

 

[Rifleman62]

" If you were released medically, and are receiving the two year rehab benefits from SISIP, you had to be completely released from the CF to get that benefit. You cannot even be Supp Res. Therefore, you are not eligible for the Reserve Pension. This is my understanding."
My point here was that to get the SISIP rehab benefits you had to take your release. If you did not take rehab benefits, you were released to the UIC as stated.
Possibly I am simple, but what does buyback "over 20 years or age 65, whatever is later" mean? Does that mean, in my case since I am almost 60, that I have 20 years to pay the buy back? I thought it was 20 years or age 65, whatever comes first, therefore I had to repay by 65. I have a advance copy of the briefing, both part time and full time if anyone wants it.